- Ergen’s airwaves strategy upended after small-business claim
- Entities will pay $413 million, forfeiting 197 licenses
Dish Network Corp. affiliates will surrender some airwaves licenses won at an auction after the Federal Communications Commission denied them a $3.3 billion small-business discount, complicating co-founder Charlie Ergen’s plans to stockpile frequencies and enter the wireless business.
The two entities -- SNR Wireless LicenseCo LLC and Northstar Wireless LLC -- will retain a combined 505 licenses valued at almost $10 billion, and pay a $413 million penalty for 197 licenses they’ll give up, according to filings released Thursday by the FCC. Dish confirmed the decisions in a separate statement.
The FCC plans to re-auction the licenses, said an agency official who asked not be identified. If the licenses fail to attract $3.3 billion in bids, then Dish will pay the difference, the official said.
Walking away from the spectrum isn’t a top option for Dish Chief Executive Officer Charlie Ergen, who has amassed a $50 billion treasure chest of airwaves. That strategy has been key to his plan to shift from a satellite-TV provider in decline to a formidable wireless network operator that will compete with Verizon Communications Inc. and AT&T Inc. in services like mobile video.
Dish has been fighting for the small-business discount because spending the extra money on airwaves means there’s less cash to spend on acquisitions to create a mobile network. It may also lead the company to take on more debt, which would put pressure on its credit rating, according to Bloomberg Intelligence. Moody’s Investors Service said in August it may lower Dish’s rating -- already three levels below investment grade. Paying the $3.3 billion would represent “a significant drain on liquidity and leveraging event,” Moody’s said.
Dish has said it followed the auction’s rules, and in September SNR and Northstar asked a court to overturn the FCC’s decision. Arguments are due after the new year in the case filed in the U.S. Court of Appeals for the District of Columbia Circuit.
R. Stanton Dodge, the company’s general counsel, confirmed the arrangements Dish made with its bidding partners and the FCC in a statement Thursday.
“Dish appreciates the diligent efforts of the FCC staff, and particularly the efforts of the Wireless Bureau, in working with DISH, Northstar Wireless and SNR Wireless regarding these arrangements,” Stanton said.
Ergen’s comments during an Aug. 5 conference call were less friendly. Ergen blamed the FCC for its unwillingness to give Dish the discount, saying the lack of support from the government is dissuading his company from pursuing big takeover deals and competing with large phone companies. He said he may even consider splitting the company in half -- one side would include the satellite-TV business and the other would comprise airwaves that could be sold or leased with some tax advantages. Still, he added, he would prefer to pursue his wireless ambitions.